01589cam a22002297 4500001000600000003000500006005001700011008004100028100002000069245013100089260006600220490004100286500002000327520065200347530006100999538007201060538003601132710004201168830007601210856003701286856003601323w3106NBER20150303173932.0150303s1989 mau||||fs|||| 000 0 eng d1 aMarcus, Alan J.13aAn Equilibrium Theory of Excess Volatility and Mean Reversion in Stock Market Pricesh[electronic resource] /cAlan J. Marcus. aCambridge, Mass.bNational Bureau of Economic Researchc1989.1 aNBER working paper seriesvno. w3106 aSeptember 1989.3 aApparent mean reversion and excess volatility in stock market prices can be reconciled with the Efficient Market Hypothesis by specifying investor preferences that give rise to the demand for portfolio insurance. Therefore, several supposed macro anomalies can be shown to be consistent with a rational market in a simple and parsimonious model of the economy. Unlike other models that have derived equilibrium mean reversion in prices, the model in this paper does not require that the production side of the economy exhibit mean reversion. It also predicts that mean reversion and excess volatility will differ substantially across subperiods. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w3106.4 uhttp://www.nber.org/papers/w310641uhttp://dx.doi.org/10.3386/w3106